A.S.Abdul Samad, Erode V. ITO, Erode

ITA 1338/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9023 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 14-07-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 13-05-2016
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: S SRIDHAR
• Keywords: Question of law; Valuation report
• Section: 143(3); 142(1); 133A

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . , . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI DUVVURU R L REDDY , JUDICIAL MEMBER ./ I T.A. NO. 1 338 /MDS/201 6 / ASSESSMENT YEAR :20 12 - 1 3 DR. A.S. ABDUS SAMAD, C/O SHRI S. SRIDHAR, ADVOCATE, 112/1, PERIYAR STREET, ERODE . [PAN:A GHPA3362L ] VS. THE INCOME TAX OFFICER , WARD I(2) , ERODE. ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE / RESPONDENT BY : SHRI S UPRIYO PAL, JCIT / DATE OF HEARING : 1 4 . 0 7 .201 6 / D ATE OF P RONOUNCEMENT : 28 . 0 9 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 3 , C OIMBATORE , DATED 3 0 . 0 3 .20 1 6 RELEVANT TO TH E ASSESSMENT YEAR 20 12 - 1 3 . THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION MADE ON ACCOUNT OF DIFFERENCE IN COST OF CONSTRUCTION. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND ALLOPATHIC DOCTOR BY PROFESSION. A SURVEY UNDER SECTION 133A OF THE INCOME I.T.A. NO . 1 338 /M/ 16 2 TAX ACT, 1961 [ ACT IN SHORT] WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 12.09.2012 . THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT ON 30.03.2013 ADMITTING A TOTAL INCOME OF .41,24,760/ - . THE SAME WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. AS THE CASE WAS SURVEYED UNDER SECTION 133A OF THE ACT, THE SAME WAS SELECTED FOR SCRUTINY UNDER COMPULSORY SCRUTINY NORMS AND NOTICE UNDER SE CTION 143(2) OF THE ACT DATED 12.08.2013 WAS ISSUED TO THE ASSESSEE AND SERVED ON 13.08.2013. 2.1 THE ASSESSEE IS THE PROPRIETOR OF M/S. BHARAT HOSPITAL AND IS SPECIALIST IN NEUROLOGY. THE ASSESSEE HOLDS M.B.B.S. DEGREE AND POST GRADUATE DEGREE IN M.D. ( NEURO). THE ASSESSEE IS A PARTNER IN M/S. SRI KRISHNA SCANS, NO. 63, MOSUVANNA STREET, NEAR L.K.M. HOSPITAL, ERODE ALONG WITH DR. SELVAPERUMAL AND DR. GANESAN. THIS FIRM IS STARTED IN SEPTEMBER, 2007 AND THE ASSESSEE HAS DECLARED THAT A SUM OF .5,00,000/ - WAS INVESTED IN THE FIRM AS PARTNERSHIP CAPITAL. THE ASSESSEE IS ALSO A PARTNER IN M/S. SANGU ME D ICALS - B ALONG WITH SHRI JIYAVUDEEN WHO IS HIS BROTHER - IN - LAW. THE ASSESSEE IS HAVING PROFIT SHARING RATIO OF 50% IN THIS FIRM. THIS FIRM WAS SRATE D DURING THE MONTH OF FEBRUARY, 2012. MOREOVER, THE ASSESSEE IS ALSO ONE OF THE DIRECTORS IN M/S. KRISH CARE REMEDY S PHARMA LIMITED. THIS COMPANY WAS STARTED IN THE LAST QUARTER OF 2010 AND A SHARE INVESTMENT [TWO SHARES ONE SHARE IS .1,00,000/ - ] OF . 2,00,000/ - WAS HELD BY THE ASSESSEE. THE ASSESSEE WAS ISSUED A NOTICE UNDER SECTION 142(1) OF THE ACT I.T.A. NO . 1 338 /M/ 16 3 ON 06.12.2013 FOR FURNISHING VARIOUS DETAILS AS CALLED FOR. DESPITE SERVICE OF VARIOUS LETTERS/REPEATED NOTICES, THE ASSESSEE HAS NOT OFFERED ANY EXPLANAT ION TO THE QUERIES RAISED BY THE ASSESSING OFFICER. THEREFORE, BASED ON THE MATERIALS AVAILABLE ON RECORD AND SWORN STATEMENT RECORDED DURING THE COURSE OF SURVEY UNDER SECTION 133A OF THE ACT, THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT UNDER SECTI ON 143(3) R.W.S. 144(1)(B) OF THE ACT BY ASSESSING TOTAL INCOME OF THE ASSESSEE AT .2,41,64,770/ - AFTER MAKING VARIOUS ADDITIONS. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND RAISED VARIOUS GROUNDS. AFTER CONSIDERING THE EXPLA NATIONS OFFERED BY THE ASSESSEE, THE LD. CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 4. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AND CHALLENGED THE CONFIRMATION OF ADDITION ON ACCOUNT OF DIFFERENCE IN COST OF CONSTRUCTION. THE LD. COUNSEL FOR THE ASSESSEE HAS MAINLY ARGUED THAT THE LD. CIT(A) HAS ERRED IN REJECTING THE WORKINGS FILED BY THE ASSESSEE WITH REGARD TO THE CONSTRUCTION BASED ON THE DECISION OF THE HON BLE MADRAS HIGH COURT WITHOUT ANY VALID REASON OR BASIS OR MA TERIAL. ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE. 5. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. FROM THE INITIATION OF ASSESSMENT I.T.A. NO . 1 338 /M/ 16 4 P ROCEEDINGS TO THE COMPLETION OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS NOT PRODUCED ANY MATERIAL EVIDENCE TO CONSIDER THAT THE ASSESSEE HAS SUPERVISED THE CONSTRUCTION OF BUILDING, THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE BEING A DOCTOR, BY P ROFESSION AND PARTNER IN VARIOUS FIRMS, IT WAS IMPOSSIBLE TO DEVOTE ANY TIME TO SUPERVISE THE BUILDING CONSTRUCTION WORK WHICH WAS ENTIRELY TOO DIFFERENT FROM HIS NATURE OF PROFESSION. ADMITTEDLY, THE ASSESSEE HAS CONSTRUCTED HOSPITAL BUILDING AND NOT ANY COMMERCIAL COMPLEX OR SO. THEREFORE, A DOCTOR, BY PROFESSION CAN ONLY BETTER SUPERVISE AS TO WHETHER THE CONSTRUCTION OF THE HOSPITAL IS CARRIED OUT AS PER THE PLAN AND REQUIREMENT OF THE DOCTOR. THEREFORE, THE ABOVE OBSERVATION OF THE ASSESSING OFFICER IN DENIAL OF SELF SUPERVISION CARRIED OUT BY THE ASSESSEE IS RULED OUT. 6. THE DIFFERENCE BETWEEN THE COST OF BUILDING ARRIVED BY THE ASSESSEE AND THE VALUATION REPORT IS REPRODUCED AS UNDER: S.NO. PARTICULARS OF INVESTMENT COST AS PER ASSESSEE (IN .) CO ST AS PER VALUATION REPORT (IN .) 1. BUILDING 1,42,92,362 2,18,04,468 2. FURNITURE & ELECTRICAL FITTINGS 4,46,686 4,46,686 [REPORTED BY ASSESSEE 3. PLANT & MACHINERY, MOTOR CARS 26,62,214 26,62,214 [REPORTED BY ASSESSEE 4 COMPUTERS SOFTWARE BOOKS 5 5,344 NIL THE ASSESSING OFFICER WORKED OUT THE DIFFERENCE IN VALUATION OF COST OF BUILDING AS PER THE VALUATION GIVEN BY THE DVO AND ARRIVED THE DIFFERENCE AT I.T.A. NO . 1 338 /M/ 16 5 .1,06,21,006/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ON PERUSAL OF THE VALUATION REPO RT BY THE LD. CIT(A), THE COST ESTIMATED BY THE VALUATION OFFICER WAS FOUND TO .2,09,23,000/ - AND THUS THE FIGURE IS SUBSTITUTED IN PLACE OF .2,18,04,468/ - . HENCE, THE DIFFERENCE BETWEEN THE COST ESTIMATED BY THE VALUATION OFFICER AND THE ASSESSEE APPEAR S TO BE ONLY . 66,30,638/ - . BEFORE THE LD. CIT(A), BY RELYING ON THE DECISION OF THE HON BLE MADRAS HIGH COURT IN THE CASE OF A. ABDUL RAHIM V. ITO 258 ITR 714, THE AR OF THE ASSESSEE HAS CONTENDED THAT THERE SHOULD NOT ANY DIFFERENCE IF STATE PWD RATES A RE ADOPTED AND SUITABLE REDUCTION FROM THE CPWD RATE IS GIVEN. HE ALSO RAISED AN OBJECTION WITH REGARD TO TAKING A HIGHER COST FOR FLOORS OTHER THAN GROUND FLOOR. THE LD. CIT(A) HAS OBSERVED THAT IT IS COMMON KNOWLEDGE AND BELIEF THAT COST OF CONSIDERATION OF A HIGHER FLOORS IN A BUILDING WILL BE LESS THAN THAT OF THE GROUND FLOOR UNLESS SOME SUPERIOR QUALITY CONSTRUCTION IS ESTABLISHED. CONSIDERING THE FACT THAT THE ASSESSEE WAS NOT HEARD ON THE LOGICAL POINT OF HIGHER FLOORS SHOULD BE ESTIMATED AT A REDUC ED RATE, THE ADDITION TO UNDISCLOSED INVESTMENT WAS RESTRICTED TO .50 LAKHS INSTEAD OF ENTIRE DIFFERENCE OF .66,30,638/ - , WHICH WAS THE DIFFERENCE BETWEEN THE ASSESSEE S ESTIMATE AND THE VALUATION REPORT. WITH REGARD TO THE RELIANCE PLACED BY THE AR OF T HE ASSESSEE, THE LD. CIT(A) HAS OBSERVED THAT THE AD - HOC DEDUCTION BY THE HON BLE HIGH COURT OF MADRAS, IS NOT SQUARELY APPLICABLE IN EACH AND EVERY CASE AS IT IS BASED ON SPECIFIC FACTS OF THAT CASE . I.T.A. NO . 1 338 /M/ 16 6 7. AGAINST THE ABOVE FINDINGS OF THE LD. CIT(A), TH E LD. COUNSEL FOR THE ASSESSEE HAS STRONGLY CONTENDED BEFORE US THAT THE ABOVE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IS SQUARELY APPLIES TO THE FACTS OF THE ASSESSEE S CASE AND SUBMITTED THAT THE HOSPITAL BUILDING WAS CONSTRUCTED IN ERODE AND T HEREFORE, FOR THE PURPOSE OF VALUATION THE DEPARTMENT SHOULD HAVE REFERRED THE CASE TO THE STATE PWD OR OTHERWISE, SUITABLE REDUCTION SHOULD BE GIVEN IN THE COST OF SERVICE PROVIDED IN THE BUILDING. WE FIND FORCE IN THE ARGUMENT ADVANCED BY THE LD. COUNSEL FOR THE ASSESSEE. WE HAVE ALSO PERUSED THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT, WHEREIN, IT WAS HELD AS UNDER: THE TRIBUNAL IN ARRIVING AT THE COST OF CONSTRUCTION TOOK INTO ACCOUNT NATURE OF THE BUILDING, THE LOCATION OF THE BUILDING AND A LSO THAT THE DEDUCTION, WAS ALREADY GRANTED ON ACCOUNT OF SELF - SUPERVISION AND THEN IT HELD THAT THE DEDUCTION OF 15 PER CENT. ON THE CPWD RATES SHOULD BE GRANTED. AS FAR AS THE COST OF SERVICES WAS CONCERNED, THE TRIBUNAL HELD THAT THE ESTIMATE SHOULD BE REDUCED TO 11 PER CENT. ON APPEAL: HELD, THAT THE TRIBUNAL HAD ARRIVED AT THE COST OF CONSTRUCTION OF THE BUILDING ON A REASONABLE BASIS AND IT COULD NOT BE STATED THAT THE VALUATION OF THE BUILDING AS A WHOLE DETERMINED BY THE TRIBUNAL WAS IN ANY WAY AR BITRARY, UNREASONABLE OR PERVERSE. NO QUESTION OF LAW MUCH LESS A SUBSTANTIAL QUESTION OF LAW AROSE OUT OF THE ORDER OF THE APPELLATE TRIBUNAL, CALLING FOR INTERFERENCE. 8. HOWEVER, THE ASSESSEE HAS NOT FURNISHED ANY DETAILS WITH REGARD TO THE AREA OF T HE BUILDING CONSTRUCTED BY THE ASSESSEE, LOCATION WHETHER THE HOSPITAL BUILDING IS CONSTRUCTED WITHIN MUNICIPAL LIMIT OR IN ANY REMOTE VILLAGE, OTHER FACILITIES AVAILABLE, ETC. THUS, IN VIEW OF THE RATIO LAID DOWN BY THE I.T.A. NO . 1 338 /M/ 16 7 HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF A. ABDUL RAHIM (SUPRA), WE DIRECT THE ASSESSING OFFICER TO ALLOW SUITABLE REDUCTION ON CPWD RATES AND ALSO FOR SELF SUPERVISION AS WE HAVE DECLINED TO ACCEPT THE FINDINGS OF THE ASSESSING OFFICER THAT SELF SUPERVISION IS NOT POSSIBLE . ACCOR DINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND PARTLY ALLOWED THE GROUNDS RAISED BY THE ASSESSEE. IT IS NEEDLESS TO MENTION HERE THAT THE GRANT OF REDUCTION ON CPWD RATES AND COST OF SERVICES ARE DEPENDS ON THE NATURE OF BUILDING, LOCAT ION , EXISTING FACILITIES, ETC. 9 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED ON THE 28 TH SEPTEMBER , 2016 AT CHENNAI. SD/ - SD/ - (A. MOHAN ALANKAMONY ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDIC IAL MEMBER CHENNAI, DATED, THE 28 . 0 9 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.